Union Steel Holdings Limited Company Registration Number: 200410181W Corporate Presentation September 2008 1 To Be Part Of The Environment Each and everyone of us is a part of the world we live in. It is up to us to protect the environment. Investing in advanced metal recycling equipment and machinery will help maximise the recycling of scrap metal, thereby saving precious natural resources. CONTENTS • • • • • Business Overview Competitive Strengths Financial Review Future Plans & Outlook Questions & Answers ABOUT UNION STEEL We are principally engaged in the recycling of ferrous and non-ferrous scrap metals, and are one of the largest metals recyclers in Singapore in terms of volume of metals recycled. We are a one-stop supply centre for recycled metals, steel products and other services. 4 BUSINESS OVERVIEW 5 CORE BUSINESSES • RECYCLING of ferrous and non-ferrous scrap metals (73% of FY2008 revenue) • TRADING of steel products (25.1% of FY2008 revenue) and • Provision of other SERVICES: (1.9% of FY2008 revenue) – – – – Waste collection and management Demolition works Rental of steel plates Others 6 GROUP STRUCTURE Union Steel Holdings Limited Union Steel Pte Ltd 100% Recycling of nonferrous metals and stainless steel YLS Steel Pte Ltd 100% Recycling of scrap metals, trading of steel products, waste collection and management, car scrapping services and rental of steel plates Yew Lee Seng Metal Pte Ltd 100% Lim Asia Steel Pte Ltd 65% Demolition of buildings and trading of ferrous and non-ferrous scrap metals Trading of scrap metals 7 CORPORATE MILESTONES 1984 Started as YLS Steel to trade in scrap metals 1999 YLS Steel was ranked one of the top SMEs in the annual Singapore 500 SME awards 2000 2001 YLS Steel was appointed by the Land Transport Authority of Singapore to provide scrapping services for deregistered cars YLS Steel was licensed by the National Environmental Agency of Singapore (the “NEA”) in April 2001 to carry out the removal and disposal of asbestos wastes in Singapore and was approved by the NEA in August 2001 to provide waste disposal services. 8 CORPORATE MILESTONES 2003 Union Steel was awarded the “Enterprise 50 Award” and, together with YLS Steel, obtained ISO9001:2000 status 2004 1. 2. 3. 2005 1. 2. 3. Union Steel was ranked one of the top SMEs in the annual Singapore 500 SME Awards Union Steel was awarded the “Fastest Growing 50 Certification” YLS Steel and Union Steel were each presented the “Enterprise 50 Award” Union Steel obtained ISO:14001 status Name changed from Union Steel Holdings Pte Ltd to Union Steel Holdings Limited Union Steel was listed on SGX Mainboard 9 CORPORATE MILESTONES 2006 Wholly owned subsidiary Union Steel Pte Ltd entered into a Sales & Purchase Agreement with Nikko Shoji Company Limited, a subsidiary of Nippon Mining Inc to supply electronic waste to the latter 1. 2007 2. 3. Signed sale and leaseback agreement with Mapletree Logistics Trust for 4 industrial-cum-warehouse buildings in Jurong for S$36.8m Acquired about 9% of ATPK Resources Tbk which is principally engaged in coal & other minerals mining, oil & gas exploitation and Investment in energy related businesses Issued warrants to shareholders on basis of 1 warrant for every 5 shares at issue price S$0.03, exercisable at S$0.12 over 3 years 10 OUR RECYCLING OPERATIONS Procurement and Collection Purchase scrap metal from local and overseas sources Sorting and Segregation Separated according to type and grade Non-Ferrous Scrap Metals Baling and Briquetting Ferrous Scrap Metals Shearing and Cutting Cut the scrap metals to obtain denser and cleaner scrap metals Compress scrap into metal blocks to meet customer specifications Quality Control, Packing and Storage Visual checks to verify grade of recycled non-ferrous metals; Weighing processed metals to ensure correct quantities sold 11 OUR RECYCLING OPERATIONS Procurement and Collection Sorting and Segregation 12 OUR RECYCLING OPERATIONS Shearing and Cutting Baling and Briquetting 13 OUR RECYCLING OPERATIONS Quality Control, Packing and Storage 14 COMPETITIVE STRENGTHS 15 COMPETITIVE STRENGTHS • Experienced management team (over 20 years of experience), and our dedication to operational excellence • One Stop Supplier of a Wide range of processed metals • Vertically-integrated business – from direct sourcing (eg. collection and demolition work) to processing and trading • Large customer base of over 1000 customers • Commitment to quality • Strong sales & marketing team – includes sales into the PRC, India, Indonesia, Japan, Malaysia, Hong Kong, Taiwan, Thailand and Vietnam 16 FINANCIAL REVIEW 17 GROUP REVENUE Major revenue contributor is the recycling business; Drop in revenue as increase in revenue from recycling of ferrous metal is less than fall in recycling of non-ferrous metal. S$m 284.8 300.0 220.8 250.0 200.0 150.0 96.9 113.0 98.5 76.1 100.0 50.0 50.4 13.0 2.1 11.8 20.7 2.3 2.4 5.7 2.6 0.0 FY2004 FY2005 Recycling FY2006 Trading FY2007 FY2008 Others 18 REVENUE BY MARKETS Strong revenue contribution from Singapore and PRC. 19 GROSS PROFIT MARGIN Gross profit margin for FY2008 increased by 67% compared to FY2007 % 20 17.6 18.3 13.2 15 10.4 10 6.5 5 0 FY2004 FY2005 FY2006 FY2007 FY2008 20 GROUP NET PROFIT Net profit increased by 212.2% to reach S$25.1million S$ 'million 30 25.1 25 20 15 9.5 9.6 6.3 10 8.05 5 0 FY2004 FY2005 FY2006 FY2007 FY2008 21 KEY FINANCIAL HIGHLIGHTS FY2007 (S$ ‘000) FY2008 (S$ ‘000) Cash & Cash Equivalent 20,163 28,775 Cash Used in Operating Activities (5,278) (10,494) Current Ratio 1.55 1.66 Inventory Turnover Days 51 100 Receivables Turnover Days 23 32 Payable Turnover Days 18 20 22 KEY FINANCIAL RATIO FY2007 FY2008 Gearing Ratio 1.08x 0.79x ROE 17.1% 36.8% ROA 6.7% 15.7% 23 KEY FINANCIAL RATIO FY2007 FY2008 2.32cts 7.24cts PE Ratio 8.19x 2.62x NAV/ Share* 13.60 19.68 EPS* * Based on a share capital of 347,174,250 ordinary shares and a share capital of 347,105,250 of ordinary shares for financial period ended 30 June 2008 and 30 June 2007 respectively. 24 Future Plans & Outlook 25 FUTURE PLANS & OUTLOOK • Robust growth in FY2008 due to strong demand in recycled steel and metal • Growth in FY2009 expected to be moderate due to volatility in metal prices • Continue to capture benefits of business integration • Expand sources of scrap metals • Actively seek merger & acquisition of steel related businesses • Outlook for FY2009 is positive, barring unforeseen circumstances, FY2009 will remain profitable • The Board of Directors holds the view that the company should continue to share part of its earnings with shareholders through dividends 26 QUESTION & ANSWER 27